Answers to Questions from the State of Michigan Concerning the Use of Proceeds from State Aviation Fuel Taxes
Pursuant to Policy and Procedures Concerning the Use of Airport Revenue , 64 Fed. Reg. 7,696 (Feb. 16, 1999) (Revenue Use Policy), state or local aviation fuel taxes collected (except taxes in effect on December 30, 1987) are considered to be airport revenue subject to the revenue-use requirement. Such taxes only may be spent on the capital or operating costs of the airport, the local airport system, or other local facilities owned and operated by the airport owner and operator if the costs are directly and substantially related to the transportation of passengers and cargo. (State and local aviation fuel taxes in effect on December 30, 1987 are not subject to the revenue use restrictions, and are not required to be used for airport purposes). QUESTION: What are the FAA’s requirements for using aviation fuel tax revenue to pay for:1. Airport infrastructure projects like a new runway for the National Guard? FAA Response: A federally-obligated civilian airport with an Air National Guard (ANG) tenant may use airport revenue to pay for a new runway or runway extension that would benefit but not be exclusively used by the ANG. However, the runway project would most likely not be eligible for FAA grant funding. If the U.S. military owns the airport and the civilian airport sponsor is a tenant, then the Department of Defense would be responsible for the operating and capital costs of the airport.
Grant Assurance No. 27. Use by Government Aircraft, requires a proration of the Federal government portion of the cost of operating and maintaining the facilities used; the airport sponsor must consider and recover the cost of the military aircraft for its impacts on the airport under certain circumstances. The assurance states: It will make available all of the facilities of the airport developed with Federal financial assistance and all those usable for landing and takeoff of aircraft to the United States for use by Government aircraft in common with other aircraft at all times without charge, except, if the use by Government aircraft is substantial, charge may be made for a reasonable share, proportional to such use, for the cost of operating and maintaining the facilities used. Unless otherwise determined by the Secretary, or otherwise agreed to by the sponsor and the using agency, substantial use of an airport by Government aircraft will be considered to exist when operations of such aircraft are in excess of those which, in the opinion of the Secretary, would unduly interfere with use of the landing areas by other authorized aircraft, or during any calendar month that –

a. Five (5) or more Government aircraft are regularly based at the airport or on land adjacent thereto; or
b. The total number of movements (counting each landing as a movement) of Government aircraft is 300 or more, or the gross accumulative weight of Governmentaircraft using the airport (the total movement of Government aircraft multiplied by gross weights of such aircraft) is in excess of five million pounds. 2. A connector between a regional mass transit line and an airport? 3. An autonomous vehicle line between a regional mass transit station and an airport? FAA Response: FAA policy is to encourage the development of intermodal connections on airport property between aeronautical and other transportation modes and systems to serve air transportation passengers and cargo efficiently and effectively and to promote economic development. (See 49 U.S.C. § 47101(a) (5).) Consistent with this policy, a sponsor may use airport revenue to pay for the airport's share of a ground access project in two general cases: (i) if the project qualifies as an integral part of an airport capital project; or (ii) if the project is owned or operated by the sponsor and is directly and substantially related to the air transportation of passengers or property. (i). Integral part of an airport capital project An example of an airport capital project would be the construction of an airport transit station incorporated into a new airport passenger terminal to provide direct transit access to the airport terminal building. The station is designed and intended exclusively for airport ground access and is effectively part of the terminal building. (ii). Owned or operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property The permissibility of using airport revenue to fund a ground access facility that extends for a distance off airport property or where the facility also will be used by non-airport passengers is reviewed on a case-by-case basis pursuant to the following three-part analysis:

 The facility must be owned or operated by the airport sponsor;

 The facility must be a primary means of ground access to the airport even if airport passengers, employees, and visitors are not exclusive users of the facility. The facility must be designed and intended for airport use even if others will also make use of it once the facility is built. Airport revenue is limited to funding the portion of the facility (road or rail line) from the airport to the nearest line of mass capacity, typically a highway or rail line adjacent to or close to the airport boundary. Notably, city streets and local highways used by passengers on the way to the airport are not designed or intended for airport access and, thus, are not directly and substantially related to air transportation; and

 The airport revenue contribution to the facility must be prorated to the forecasted airport travelers’ use of the facility. For example, where a transit line is designed to run through airport property in order to provide an airport station, airport revenue may be used for 100 percent of the actual costs of the structures and equipment associated with the airport terminal building station, and a portion of the costs ofbuilding the portion of the rail line that crosses airport property, based on the number of riders using the airport station as a percent of the total number of riders going through using the airport station to other stations. An FAA Office of Airports policy document, Bulletin 1: Best Practices-Surface Access to Airports , provides additional guidance on the use of airport revenue for airport ground access projects – see pages 3-5: http://www.faa.gov/airports/resources/publications/reports/media/bulletin_1_surface_access_ best_practices.pdf

. Examples of FAA approved airport revenue to fund ground access projects follows:

 San Francisco Bay Area Rapid Transit (BART) - FAA approved the use of airport revenues to pay for 100% of the costs of building an airport terminal station and a rail connector between the airport terminal station and the BART line. o Station was located entirely on airport property, and was intended exclusively for use of airport passengers (including airport visitors, meeters-and-greeters, and employees working at the airport). o BART extension was intended for the exclusive use of people traveling to orfrom the airport and included design features to discourage use by throughpassengers. o FAA concluded that the possibility of incidental use by non-airport passengers did not preclude airport revenues from being used to finance 100% of the otherwise eligible costs.

 Portland Airport Metropolitan Area Express (MAX) - FAA approved airport's longterm, no-cash lease of 120 acres of airport property to Cascade Station Development Corporation in exchange for their design and construction of one segment of the Airport MAX light rail system (Portland International Center (PIC) segment) o PIC acquired with Federal grant funds 458 acres of airport property to be used as a business park. o FAA reviewed the sufficiency of the value of the PIC segment development project obtained in exchange for the long-term lease of airport property. o FAA found PIC segment directly and substantially related to air transportation of passengers or property based on projection that 65% of ridership of segment would be going to or from the Airport. o FAA concluded the no-cost lease was consistent with Federal revenue use and Grant assurances as to the Airport being operated on a self-sustaining basis.
 Minneapolis Hiawatha Corridor Light Rail System - FAA approved the use of a portion of airport revenue for the construction of two airport stations as part of a light rail system. o The two stations were located within the existing airport boundaries and integrated into the airport’s terminals; and the stations and line were projected to provide for the transportation of significant numbers of daily airport passengers.o Additional inter-modal transportation-related benefits included eventual elimination of shuttle bus service transporting airport passengers between two terminals, reduced congestion on airport roadways, and the ability to accommodate future passenger growth that exceeded available parking. o Light rail system also served non-airport passengers between the downtown Minneapolis area and the Mall of America. o FAA concluded airport revenue may fund a portion of the project located on airport property based on the number of projected passenger use for access to the airport as a percent of total riders using the light rail system on airport property. For your proposed connector to be funded with airport revenue as a project “owned or operated by the airport owner and substantially and directly related to the air transportation of passengers or property:”

 The airport owner or operator must hold legal title to the facilities for which airport revenue is used;

 The governmental entity that owns or operates the airport must be legally responsible for the operation of the ground access facility (e.g., transit system) and operate the facility either with its own employees or through a management contract with a private firm or other public agency; and

 The proposed connector would have to be “directly and substantially related to the air transportation of passengers,” meaning that the project is intended primarily for the use of airport passengers (i.e., air passengers, airport employees, airport visitors), designed and constructed for ground transportation to the airport, and is projected to be used primarily by airport passengers. Airport funds could not be used for portions of the project that are not necessary for the purpose of serving airport passengers. Airport revenue to fund project facilities used by both airport and non-airport passengers must be proportional to airport passenger use of such facility. 4. Community college and university aviation programs? 5. Community college and university aviation-related skilled-trade programs like aluminum and composite manufacturing? FAA Response: 49 USC 47107 and 47133 permit the use of a State tax on aviation fuel to support a State aviation program. Pursuant to the Revenue Use Policy, at page 7721, airport sponsors are permitted to charge reduced rental rates, including nominal rates, to not-forprofit aeronautical secondary and postsecondary education programs conducted by accredited educational institutions, to the extent that the reduction is justified by tangible or intangible benefits to the airport, generally, or to civil aviation, specifically. The FAA has not developed extensive guidance in this area. Accordingly, we need more detailed information about scope and content of the community college and university aviation programs and of the skilled-trades programs that you are considering funding, theirrelationship to the State’s aviation programs and agencies as well as the tangible benefits

State aviation programs will receive from such programs. 6. A refund of aviation fuel tax dollars to an air carrier in return for that carrier’s commitment to invest in new infrastructure at an airport. FAA Response: We request you submit additional information about the scope and content of this proposal, including an explanation of how it complies with the aviation fuel tax and revenue use requirements. On its face without a clearer understanding, refunding aviation fuel taxes lawfully collected to an air carrier does not appear to be a permissible use of airport revenue pursuant to 49 USC 47107 and 47133, even if premised on an air carrier investing matching dollars in new airport infrastructure. Payments to an air carrier are not a capital or operating cost of the airport and it is doubtful how this arrangement could constitute a state aviation program. Airport revenue must be directly spent on needed infrastructure, singly or in tandem with FAA grant funds if the project is eligible. Also, refunding lawfully collected aviation fuel taxes to offset a carrier’s investment in new infrastructure arguably is not consistent with the Rates and Charges Policy and Grant Assurance 24 because airport fees typically are set according to either a ‘‘residual’’ or ‘‘compensatory’’ rate setting methodology, or a combination of the two.